The wealth gap in Canada between the rich and the poor has reached a historic high in the first quarter of 2023, as reported by Statistics Canada. This increase in the wealth gap can be attributed to high inflation rates and declining real estate values.
During this timeframe, the net worth gap grew by 1.1 percentage points, marking the fastest growth since 2010 when record-keeping began. However, the wealth gap in the first quarter of 2023 was still lower than the first quarter of 2020, with a decrease from 65.6 points to 65.1 points. The gap had previously decreased by 1.6 percentage points between Q1 2020 and Q1 2022.
In the first quarter, the top 20% of earners in Canada held 67.8% of the country’s net worth, while the bottom 40% held only 2.7%. This significant difference between the two income groups defines the wealth gap.
“Most of Canada’s wealth is concentrated in a small number of households,” stated Statistics Canada in its recent report.
The report also highlighted that the least wealthy households tend to be younger. Despite comprising only 36.2% of all households, individuals under the age of 45 accounted for 55.2% of the bottom 40% of net worth in Canada. These younger households have been hit harder by recent economic pressures, such as inflation, resulting in a 13.8% decrease in their wealth in Q1 2023 compared to the previous year. This decrease is more than triple the rate of the wealthiest households.
Lower Real Estate Prices Drive Decrease in Wealth
The report indicates that the overall net worth of households in Canada declined in the first quarter of 2023, primarily due to lower real estate prices.
In the first quarter of 2023, the average net worth of households under 35 years old experienced the largest decline of 8.7%, while households aged 55 to 64 years old saw a decrease of 1.8%. These declines can be attributed to the national average price of residential homes, which fell by 13.7% to $686,000 compared to the same quarter last year. Additionally, the average real estate value held by households decreased by 8.6% during the same period.
The housing market in Canada experienced a correction last year due to rising interest rates set by the Bank of Canada. However, recent national data indicates that sales activity and prices have started to rebound in recent months.
According to StatCan, younger households are more susceptible to reductions in real estate values as they rely more on this asset category for their net worth. In the first quarter, real estate accounted for 88.3% of the wealth of households under 35 years old, compared to 40.1% for households aged 65 years and older.
StatCan also highlighted that mortgage debt increased by 23.8% for the least wealthy households, outweighing their real estate holdings’ value increase of 6.2%.
© 2023 Global News, a division of Corus Entertainment Inc.
Denial of responsibility! VigourTimes is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
